US economy adds 171,000 jobs, but unemployment rate rises to 7.9%

Friday

Nov 2, 2012 at 8:00 AMNov 2, 2012 at 3:25 PM

BLOOMBERG NEWS

In the last assessment of the job market before the presidential election, the Labor Department announced Friday that the nation's employers had added 171,000 positions in October, as well as more jobs than initially estimated in both August and September.

The unemployment rate ticked up slightly to 7.9 percent in October, from 7.8 percent in September.

The report showed persistent but modest improvement in the U.S. economy. It was based on surveys conducted too early in the month to capture the work stoppages across the East Coast from Hurricane Sandy.

“Generally, the report shows that things are better than we'd expected and certainly better than we'd thought a few months ago,” said Paul Dales, senior U.S. economist for Capital Economics. “But we're still not making enough progress to bring that unemployment rate down significantly and rapidly.”

The latest figures are probably good news for President Barack Obama, as there was widespread suspicion that the previous month's large drop in the unemployment rate — below 8 percent for the first time since he took office — might have been a statistical fluke.

Even so, the numbers arrived somewhat late in the game to have a huge impact on the election, particularly given the ongoing focus on Hurricane Sandy.

Economists were hopeful that once the election was over and Congress addressed the major fiscal tightening scheduled for the end of this year, job growth could speed up further.

“If we can do this kind of job growth with all the uncertainty out there, imagine if we were to clear up those tax issues and hold back the majority of tax increases that are pending at the end of the year,” said John Ryding, chief economist at RDQ Economics.

“We could do much better in 2013, maybe as well as we appeared to be doing earlier this year.”

Job gains in previous months were revised to show bigger gains. September's increase of 114,000 new jobs was revised to 148,000, and August's 142,000 was revised to 192,000, the government said.

In October, the biggest job gains were in professional and business services, health care and retail trade, the Labor Department said. Government payrolls dipped slightly. State and local governments have been shedding jobs most months over the last three years.

One of the lowlights of the report was in hourly wages, which remained flat in October after showing barely any growth in the previous several months.

“Perhaps the decline in real wages is a factor here in being able to employ more people,” Ryding said. “It's something to keep in mind when we think about creating jobs and whether we're maybe creating the wrong sort of jobs.”

A report from the National Employment Law Project released in August found that while the majority of jobs lost in the downturn were mid-wage jobs, the majority of the jobs created since then have been lower-wage ones. There have now been 25 straight months of jobs gains in the United States, but the increases have been barely large enough to absorb people entering the workforce. A queue of about 12 million unemployed people remain waiting for work, about two out of five of whom have been out of a job for more than six months.

That is in addition to more than 8 million people who are working part-time but really want full-time jobs.

“I'm not just competing against all the other people who are out of work,” said Griff Coxey, 57, of Cascade, Wis., who was laid off in May from his controller job at a small business. “I'm also competing against all those people who are actually working but are underemployed.”

Like 2 million other idle workers, Coxey is scheduled to lose his unemployment benefits the last week of the year, when the federal extensions abruptly expire. He said he still has some savings to fall back on, but many workers do not.

Labor advocates and economists are hopeful that Congress will renew the benefits as part of their discussions of the “fiscal cliff” during their postelection session. So far, though, the issue has received little attention, and analysts worry that ending extended benefits could disrupt what modest forward momentum the economy currently has.

“Federal unemployment benefits are one of the most effective stimuli we have,” said Christine L. Owens, the executive director of the National Employment Law Project, a liberal research and advocacy organization that focuses on labor issues.

“The recovery is still fragile,” she said, “and to pull that amount of income and expenditure out of the economy — particularly at a time when people thinking about the holiday season — will have a significant impact on not just those individuals and their families but the economy as a whole.”

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